Mark, what do you particularly like about your job and how have you been able to leverage your qualifications and wide experience in the financial markets in your day to day responsibilities at Valbury Capital?
Few of us get the opportunity to establish a new broker, literally starting a business outline on a sheet of A3. Putting these ideas into a plan, turning the design into reality and seeing a newco realised and grow is one of the best experiences in business. We are still a very young company so there are plenty of areas which we need to develop further but the market and client response to what we are building has been very positive. That is always encouraging both personally and for the team. At Cantor Fitzgerald (now BGC) it was called ‘proving by doing.’
I was a director in my twenties and have had the opportunity to establish a number of new companies and businesses prior to Valbury Capital; e-Speed Europe, Cantor Index, and Marex (now Marex Spectron) for example, as well as acquisition and product development responsibilities. I worked in some very talented and driven executive teams and Valbury represents an opportunity to apply that experience to benefit our clients.
The day-to-day responsibilities are best handled by our management team and they do a great job. At their core, the financial markets remain a people business and the opportunity to build up and work with our management team and Board is a particular highlight of my job. I have worked with many of them before so that process has been more seamless.
My focus is relationship management, product and sales development and hopefully in the near future I can start looking at partnership and acquisition opportunities. Additionally I focus, with the leaders of our sister company in Asia, on business development opportunities for VCL in that region.
My previous experience as a front line CFO and COO has given me a solid background in areas such as technology, operations, compliance and risk which is increasingly an essential requirement for a CEO.
Why was Valbury Capital established and how would you describe the company’s philosophy and approach to doing business?
The drive to establish Valbury Capital resulted from the coming together of two initiatives, one in London and one in Asia.
The London broking market was becoming increasingly polarised with many of the mid-market brokers, who serviced the professional market sector between the retail firms and the investment banks, being bought out by larger banks and IDBs. This was partly due to the development of electronic trading, as the high cost of developing and supporting proprietary technology had driven independent firms into the arms of larger group companies. It was also a consequence of the insatiable appetite for expansion that the banks had prior to 2008. The mid-market firms largely disappeared and the market polarised into high volume retail firms and large institutions.
We believe that there have been a number of developments that will lead to the re-emergence of the mid-market sector. As a consequence of the 2008 banking crisis, the banks are retrenching from the mid-market and refocusing on their traditional client base of larger and complex clients. This trend, alongside the collapse of MF Global has only served to widen the market gap between the retail firms and the banks. Also, the progression of vendor based technology and services has removed the requirement for companies to develop proprietary technology to the point where we view the ownership of proprietary platforms as a strategic disadvantage. This has made it easier for new firms to break into the market and increasingly these platforms are available on a hosted basis and with extended project management and implementation support. Lastly, we have seen an increased focus on the growing Asian markets.
I saw a need for a new broker to focus on these trends, to service the professional investors and traders that were looking for a mid-market broker, whilst also providing a specialist bridge to the Asian markets and investors.
At about the same time Valbury Asia, an established mid-market broker, had identified the need for access to a European based broker to facilitate their clients’ requirements. We got together and Valbury Capital was established.
Our philosophy is straightforward and in many ways we take a very traditional approach to broking. We are independent, transparent and relationship driven. We exist simply to service the requirements of our clients and their needs come first. Our interests and those of our clients don’t conflict, we conduct no proprietary or b-book trading.
We think that these values are increasingly important to our clients - a full service broker that brings traditional client service values into today’s electronic trading world.
What attributes does Valbury Capital have, which, in your opinion are helping it to differentiate it from many other brokers?
This is not really a problem for us at the moment because of where we are positioned in the market. There are few current brokers that we consider to be direct competitors, servicing our particular market sector or with our areas of specialist focus.
The obvious downside of that is that when you are trying to develop a business and you cannot find an example out there of what you are trying to achieve, then there is nothing to use as a template. We started out by making a list of what we wanted to be known for in the market, our values, and the attributes that we felt our target client wanted from its broker. We built our strategy from that, from the ground up. This was very different to setting up say Marex where the business model was already well established. If as a result of this process we end up having similarities to other firms in our market then it is a comforting coincidence.
We don’t focus on trying to differentiate ourselves but instead we concentrate on understanding the attributes that our clients in the marketplace want us to have. These attributes constitute our core values: independence, compliance, reliability, trust, transparency, professionalism, relationship-driven. It is about aligning our clients’ interests with our own. Our entire strategy, including the way we use technology, comes from these values.
There is a small overlap with the ‘pro’ departments of the retail firms and with the institutional banks, but we strongly believe that a dedicated mid-market broker is best placed to service the clients in our market sector.
What range of products and services does Valbury Capital currently provide and what types of clients are you servicing?
Our primary focus at present is on FX, Futures & Options, Equities and CFDs. We have recently added deliverable FX and an oil/gas desk, and will continue to develop our product offering in line with our clients’ needs. We operate a voice–electronic model, with a significant proportion of our client orders being phone broked or coming in through other non-platform channels.
Our clients are reflective of our market positioning and range from experienced HNWI’s, professional trading groups, hedge funds and corporates, to banks. We focus on clients who are not natural clients of the large banks, either by size, requirement or because they are looking for the more personal service and execution capabilities of a bespoke firm.
Geographically our clients are truly global, with a bias towards EMEA, Eastern Europe and Asia.
The wider Valbury Group has been providing brokerage and corporate finance services in Asia for over 25 years. In what ways does being part of that powerful Group assist your London operations to position itself as a leading gateway to the region?
Our relationship with our sister company in Asia is core to our business model. Our Asian based clients want to deal with a broker that understands their specific requirements but they also value the benefits of trading through London – we seek to offer the best of both.
My view is that in the mid-market, as well as offering a strong general broking service you need one or more specialisms. At Marex for example it was commodities and particularly metals. For us it is Asia, servicing Asian investors looking for global access via London, and international investors seeking specialist access to the Asian markets.
Regional expertise is tremendously hard to develop. Many European and US firms have tried to expand into Asia and found it very difficult, but it is such a critical region for growth that you need to be there.
If Asia is important to you then it makes sense to have investors and a sister company with decades of experience in the region.
Equally, for our sister company and investors, it is critical to have access to a broker based in London, one of the main global trading hubs. The ability to offer a European based service option to clients, as well as access to our platforms, liquidity and regional product expertise was the main driver in their investment in VCL.
That said we are a new company and one of our key objectives for the next 12 months is to further develop levels of co-operation, infrastructure and to share knowledge and expertise with our colleagues in Asia.
Valbury Capital offers a more traditional and personalised client management service. What advantages does that have and why is it so attractive for increasing numbers of traders?
Relationships are back.
With the increased uncertainty of the financial world over the past 5 years, the negative press, the scandals, the loss of confidence in the regulators, ratings agencies and institutions and the high profile corporate collapses, (the demise of MF global being a particular game changer), it is not surprising that clients have an increasing interest in meeting and getting to know the broker that they are entrusting with their funds and interests. This, alongside the retreat of the investment banks, has led to clients taking a more cautious, personal and relationship-driven approach.
Valbury Capital seeks to develop a longer term relationship with clients, This ensures that we develop a better understanding of their needs and can give them the individual, tailored approach that they require.
Your firm has a commitment to leading edge financial technology. In what ways has the company been able to translate that into superior trading and customer service capabilities that really benefit clients?
We take a platform neutral approach to technology. Our trading technology allows our clients to utilise the industry standard platforms as well as niche solutions to maximise their trading potential.
This is for a number of reasons. Firstly, if you are tied to a single platform then it may restrict your ability to service your client. You may end up trying to provide something that is not particularly suited to your client’s needs, primarily because you are trying to promote your own proprietary technology. Being platform-neutral means we can tailor our service to our clients’ differing requirements and style. We are flexible to our clients needs so, for example, we recently added CQG on the basis of client feedback.
Secondly, the trading technology business is becoming increasingly commoditised and dominated by key industry standard platforms. Our clients generally know what they want. Our ability to offer the platform brands that our clients are demanding is critical to our business
Finally we have to be able to keep up with the rapid pace of change. Technology is an incredibly dynamic environment and because we are not tied to any single platform we can take full advantage of change and developments to the benefit of our clients.
As technology advances we can select those platforms that are progressing rather than be burdened by out-dated or latent kit. We continually monitor developments and change our strategy accordingly. That said, our existing vendors tend to be leaders in terms of development, which is probably the reason they became leading platform vendors in the first place.
Where do you expect Valbury Capital will be focusing its efforts over the next few years to further develop and enhance its existing range of products and electronic trading services?
This is a key question.
We will obviously continue to listen to our clients and review available platform options to make sure we maintain the required range of platforms. We are increasingly pushing our platforms out to the Asian markets and working with our Asian based colleagues and our vendors to get the best out of platforms for these specific markets. We are also talking to US based firms with the goal of extending our Asia-Europe bridge to the US markets.
Regulatory change is also going to be an area of focus for all of us. There is a great deal of it in the pipeline, not least the European financial transactions tax and FATCA. The time window between clarification of requirements by the regulators and implementation can be somewhat short and the ability of vendors to respond rapidly to these changes, once clarified, is going to be critical for brokers and a real challenge for the vendors.
Many of our clients are multi-asset and we will continue to focus on developing the integration of our services across asset classes.
There are obviously multi-asset platforms available but they may be inferior to dedicated platforms in individual asset classes. This challenge applies as much to middle-ware and settlement technology as it does to the trading platforms.
Market information is also an area of particular focus for us. Our clients are primarily professional traders and have many different ways of accessing the basic headline data, news and charts. What they are increasingly asking for is more in depth analysis on topics that are important to them. This has proved surprisingly difficult, again probably because of the polarisation of the market. We are currently working with vendors to provide an information service that is fully focused on and tailored to our clients’ interests and needs.
The FX market is technologically complex, fast moving and constantly evolving. What steps are you and your executive team are taking to ensure that Valbury Capital keeps pace with the latest industry developments to maintain its value proposition and competitive edge in the FX space?
One of the first things I did was to appoint an IT industry executive to our Board to give oversight on the latest trends and help develop a strategy that future-proofs our business. He is an executive from TraderTools Inc., one of the major FX platform vendors, and gives us invaluable insight into how we should develop our technology strategy in the future.
Alongside our own research team and executives, our clients and prospective clients provide invaluable feedback and insight and we listen to them very carefully. Generally, technology appears to be becoming more of a package issue. Whilst the client facing technology is critical, killer new features are becoming increasingly rare and you seem to hear the words ‘first move advantage’, mentioned far less. Clients are increasingly looking towards a broader technology package offering stability, compatibility, high service levels, reporting and statement capabilities.
Do you believe that the brokerage business and the way that it operates has changed significantly for the better since you started your career and are you optimistic that clients will continue to benefit as the industry adapts to a new world shaped by new e-trading technologies and marketplaces, increasing globalisation and more regulatory oversight?
I don’t think anyone who has worked in financial markets over the last 5 years would say things have changed for the better. You only have to get into a taxi in London to notice the difference. An answer to, ‘So what do you do?’ of ‘work in the markets’, is going to get a very different response now to one of a decade ago,
The high profile collapse of MF Global has had a particularly big impact on the broking sector, as did the manner of its collapse. We have more than one client who having had their funds caught up in Lehman, moved to MF Global only to have a repeat experience. Not surprisingly, clients ask a lot more questions now before taking you on as a broker.
There has been a general loss of trust in the industry and we are all going to have to work very hard to regain it. In my view, the momentum for this needs to come from the broking industry itself, from CEOs and corporate officers, rather than from regulators. It is back to the theme of restoring traditional client values.
The impact of this for Valbury is positive. Relationships are back, visiting clients and developing personal client relationships is more important now than perhaps at any other time in the last 10 years. The surprise from clients that the CEO or CTO has turned up to meet them is revealing. Such visits used to be the norm.
The main benefit to clients over this period has without doubt come from technology. Brokers have been forced to innovate, to raise service levels and to be more competitive on pricing. You have to be very focused to get your product right and stay competitive. Technology has also enabled medium sized businesses to become truly global in terms of client base, both in terms of connecting with potential customers and in transacting with them afterwards. In the past you would have required an extensive network to deliver such a service. Again, the client has gained from the resulting competition. I am not sure this will continue in the short term. As the banks retrench, the implications on market access could restrict growth in this area.
I was at a conference recently where an economist said that business growth in the next decade will come from collaboration between medium-sized businesses. I think for the technology firms this may mean re-learning and developing their capacity to support mid-market businesses, with an emphasis on providing support in areas such as hosting, project management, testing and training; things that larger clients have traditionally dealt with in-house.